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30.5.06

Circle of Complicity – Dublin property prices

I’ve been a-thinking about this a lot, and it’s a representative analogy of the unique bubble of the Celtic Tiger. It’s also a riddle and a conundrum that explains why property prices in Dublin have been skyrocketing for the last ten years; pricing almost everyone out of the market – everyone except the desperate and the fabulously wealthy. Here’s the problem in a nutshell.

When the Irish government of the early 90s lowered interest rates and introduced incentives for companies (esp in the Finance and IT sectors) in the hope of boosting a long-stagnant economy, they also created ways of defraying tax back as economic stimulus. A company could minimise its bill by investing back in property development. Result: property speculation became big business; new building developments went up everywhere and cranes began to dominate the Dublin town aesthetic. Hotels, residential housing developments, major refurbishments, huge commercial estates. Which meant extra jobs and a greater need for housing, so the demand helped supply and tax incentives along.

With many property developers benefiting from tax breaks and high demand, property prices went through the roof. Everyone who owned a house or two in Dublin suddenly became semi-millionaires. This is why the Celtic Tiger was perceived as a success. Everyone refinanced and got brand new BMWs, investment properties, summer houses in Spain. Quality of life was perceived to have improved but nothing was really fed back into infrastructure, kinda like the Republican idea that tax cuts for the rich will benefit everyone. The hospitals are still shite. Inequality is second only to America.

An interjection at this point would point out that a) the Irish taxation system is about 40 years behind the rest of Europe and b) the government was happy to be getting so much more revenue from its range of new stealth (or hidden) taxes as well as all the extra income tax and stamp duties. Not that this meant revenue went back into infrastructure, not by a long shot. And not that this streamlined or modernised the taxation system; for instance, it was only until recently that you could get away with not declaring income from overseas accounts. In fact, the government doesn’t care at all that many people get away with dodgy declarations (you declare what you want, in essence, if you don’t pay PAYE) because the system is obtuse and expensive accountants are very willing to overestimate your projected income in the hope of securing a loan, or point you to ways of defraying your bill…).

In the first years of the boom, real estate agents and speculators made huge sums of money and consequently lent the industry an air of cutthroat greed which trickled down to the bottom, with desperate renters trying to outbid one another for subdivided crapshacks (and landlords taking the highest bids). New money made a lot of landlords very arrogant. But, people selling property could make even more because most sales-deals are not of the Western, above-board kind but a dodgy three-part system of closed auctions where bidders are played off against eachother via a ludicrous, nominal guide price. A house sold at auction can go up to four, five times higher than the guide price, especially if already near the million mark. The agents can treat buyers like pawns, hanging on for the competitive bidders, and of course they make huge commissions when trumped-up prices go higher. Even when the closed auction seems to be over and done, there’s still an opportunity for a higher bidder to come in and outbid the final offer. To wit: it’s all deliciously corrupt and greedy if you know how to fake a few bids with your real estate chums. The industry regulator, of course, thinks there’s nothing wrong with the current system, writing it off as merely the economics of a booming economy. Speaking of write-offs, one of the tax incentives makes it more worthwhile for a company to leave a property empty than to lower the rental price and get tenants in. Go figure. Keep them prices high.

So, tax incentives and speculation spiked the prices, and real estate agents benefit from a very dodgy system (as do their notaries and solicitors). Add in the banks willing and eager to lend everyone huge sums at low rates, and then price hikes are no biggie. If it continues at this rate, they say, then imagine what it’s worth in 35 years when you’ve finished paying your mortgage! (Do a quick calculation: if you pay a third to two thirds of your mortgage in added interest, and the average price of a house in Ireland is around €350,000, and there are several hundred thousand in the same boat, then you can see why Ireland is perceived as a wealthy economy: the finance sector is laughing all the way to, or rather, inside its own bank).

Now, in an average year the government pulls in well over a BILLION euro in stamp duties (hey, like a stealth tax), so of course the government benefits from all the speculation too. None of that money goes into regulating the industry properly or fairly. Government has cosy relations with developers (see tax breaks: those hands don’t wash themselves) and government favours dodgy or corrupt developers (one roads/construction company favours exploiting Turkish labour at half the minimum wage. No harsh penalties or regulation there. Of course they can outbid all the other companies for government tenders, they don’t even pay their workers properly, the workers are dependent on the company for work visas). Many property developers are either corrupt in not paying fair taxes and fees, or completely circumventing regulators and auditors (think dodgy changes in name) and others are adept at exploiting government contracts (like the hilariously useless LUAS) by dodgy workmanship, dodgy and slovenly planning and by coming in over three times the alloted budget (thankyou taxpayer!). Which, for a government tender, you’d think would have the entire nation up in arms. But no, the two LUAS lines don’t even connect, or integrate well with other public transport, or even travel in meaningful directions. But says the government: everyone’s lifestyle is good, property prices are healthy and high, there couldn’t possibly be anything wrong! Well, unless of course you’re a first time buyer looking at €400,000 for a two bedroom flat not too close to the city, which is probably poorly constructed or leaky or showing signs of early structural damage. Thank the builders, contractors, tax laws and governmental incompetence for that one.

When everyone gets a kickback – owners, developers, agents, the government – there simply IS NO PROBLEM. The classic Irish head-in-the-sand. The beauty of which is that there’s really no fine line between mild corruption and general incompetence, from the government on down. Which is worrying.

But, it has created a bubble of artificially exaggerated and unreal property prices – the banks are only happy to lend acres of money – but it cannot last and the entire circle of complicity will fall apart when the banks start to ratchet up interest rates by whole points, by necessity. If I remember rightly, several EU reports have indicated this is becoming glaringly necessary and long overdue if the economy is to stay viable. Most people paying off a second or investment property will be forced to dump it, there’ll be an oversupply of property all over the shop, and prices will be forced down by simple economics. There’s already a feeling of oversupply in commercial lets. Many middle-income folks won’t be able to keep up repayments and go into hock, and the bank will cash in again. And the contractors will be fat enough by then to move their money and projects to new EU countries looking to repeat the magic Celtic formula.

In sum then: dodgy government » dodgy tax laws + dodgy real estate agents » cheap loans = unreal property values » imminent collapse of the value bubble. And everyone does of course suspect that it’s unsustainable, but whatchoo gonna do?

posted by rino breebaart  # 11:29 pm (1) comments

21.5.06

Prince, Diamonds and Pearls

I can say, without equivocation or pimply hyperbole or excessive superlative, that Diamonds and Pearls is the greatest pop song of all time. No question. It’s got it all: funky tight rhythms, catchy melodies, affecting and natural choruses, light but definitive hooks and the surest pop touch (the kind of pop mastery that Prince would barely shrug his shoulders at). Chintzy synth lines, call and response vocals and harmonies, soul-pop vibes and trademark guitar licks, and supremely tight / varied changes (indeed, about four times the amount of changes you’d expect in a basic hit, including a major key change and turnaround). And it never seems to waver for a second, every part interlocks and leads to the next, every drum fill / lick sits right, it’s perfectly crafted and flowing. Super slick and layered production values with ferocious bottom and typically deep snare attack. I remember an interview with Michael B saying they nailed it in a single take in Japan or someplace; which, considering how long it’s taken me to ge the whole bass part down, is testament to superior musicianship. Listen to the subtle bass-behind-the beats between Sonny T and Michael B from 1:20 (‘Which one of us is right…’) to about 1:40 – supremely funky and deep in the pocket. The pompous key change to D# at 2:06 leads to tight funk at 2:24, repeating the opening bass riff. Sonny’s work is amazingly tight and nuanced at every point; it’s not until you play along that his pacing and emphasis come out clearest. Compared to the rather straight-ahead Cream, D&P has all the intricacy of a Swiss timepiece. Pure pop with deep pocket grooves and vocals stacked on top. Catchy as all hell. Pure Prince.

posted by rino breebaart  # 8:15 pm (2) comments

7.5.06

Reimer | Setzer, Together

Reviewer’s confession: I brought this disc purely on the basis of its ad slogan: "Only voice and bass guitar - does this work?" The link came from a TalkBass forums byte, the CD came from CDBaby and the CD was in my hands within a week (bless you internet). The slogan appealed to me because I’m trying to work out something similar myself, something basic and folk-y using only basic bass for melody, rhythm and chordal movement, and a call and response vocal on top. Reimer|Setzer approach it more from a Eurojazz angle: Sabine Reimer is schooled in standard phrase and projection, bending up to a note, relying on timbre for expression (alas, I can’t think of a direct parallel). Markus Setzer plays 7 and 6 string bass instruments (yes, pretty exotic stuff) like a jazz guitarist does counterpoint and chords. Which bugs me a bit because when you’ve got six strings and above, you’re playing guitar, not bass per se. You might as well be playing jazz chords all the time: at least Setzer steps out occasionally with a slap routine to reinforce the bass angle. It reminded me of a time seeing a six-bassist doing jazz cuts (could be Soup Plus in Sydney); I was disappointed he only played chords. Sure it sounded deeper and warmer, but some of that minimal magic of the bass was lost. Bass is about simple lines and foundation. Which makes me think that cutting it back from the jazz-chords angle (and Setzer definitely plays in the vein of the modern virtuoso) and keeping it limited and grounded: most bass remember is just dum-de-dum-dum. If your bass tone and vocal interlocking is tight, related and rhythmically melodic (that is, implying rhythmic counterpoint), you should have enough foundation (my other thinking lies with the expressive supremity of the timbales: two drums and percussion, so much funky freedom). But back to Reimer|Setzer. The music is thoroughly proficient; the range and vocal/song choice a little limited (some covers might’ve anchored this better, a broader lyrical range and attack) and almost same-y in the end, which is regretable 'cos it’s a very interesting duo-experiment. I might’ve opted for a different range of bass tones, but then again I play a Warwick 4. But in the end it does work, it’s a tasteful exercise in jazz motions.

posted by rino breebaart  # 11:19 am (0) comments
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